IMF chief Christine Lagarde has been put under formal investigation by French magistrates for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.

Lagarde was questioned by magistrates in Paris this week for a fourth time under her existing status as a witness in the long-running saga over allegations that tycoon Bernard Tapie won a large arbitration payout due to his political connections.

Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.

Lagarde's lawyer, Yves Repiquet, told Reuters he would personally appeal the magistrates' decision. That means Lagarde would not have to return to Paris in the meantime, allowing her to continue her duties as managing director of the International Monetary Fund uninterrupted.

The inquiry relates to allegations that Tapie, a supporter of conservative former President Nicolas Sarkozy, was improperly awarded 403 million euros ($531 million) in an arbitration to settle a dispute with now defunct state-owned bank Credit Lyonnais.

The inquiry has already embroiled several of Sarkozy's cabinet members and France Telecom's chief executive, Stephane Richard, who was an aide to Lagarde when she was Sarkozy's finance minister.

In previous rounds of questioning, Lagarde has not recognized as her own the pre-printed signature to sign off on a document facilitating the payment, Repiquet told Reuters by telephone.

What's This Really About?

Politics. If Nicholas Sarkozy won the last presidential election instead of Francois Hollande, there would be no investigation.

Is Lagarde guilty of anything?

Not knowing the peculiarities of French laws (other than to know full well from personal experience French laws are damn peculiar), it's had to say.

In the US, it's safe to conclude that if she funneled funds for political purposes, one side would consider her a hero, with the other side demanding "justice".

Here, individuals other than Bernie Madoff and Martha Stewart don't get prosecuted. And companies, especially banks, get off the hook with at most a small fine relative to the billions of dollars siphoned out of the system.